Implementing Merchandise Plans

by: Luis Fernando and Vincent Gan

Chapter Objectives

 To describe the steps in the implementation of merchandise plans: gathering information, selecting and interacting with merchandise sources, evaluation negotiation, concluding purchases, receiving and stocking merchandise, reordering, and re-evaluation  To examine the prominent roles of logistics and inventory management in the implementation of merchandise plans


Gathering Information

 After overall merchandising plans are set, more information about target market needs and prospective suppliers is required before buying or rebuying merchandise.  In gathering data about the marketplace, a retailer has several possible sources: Consumer Suppliers (Manufacturer & Wholesalers)

Selecting and Interacting with Merchandise Sources

 The next step is to select sources of merchandise and to interact with them. Three major options exist: Company-owned Outside, regularly used supplier Outside, new supplier

Evaluating Merchandise

 Whatever source is chosen, there must be a procedure to evaluate the merchandise under consideration. Three procedures are possible: Inspection Sampling Description

Negotiating the Purchase

 A retailer negotiates the purchase and its terms. A new or special order usually results in a negotiated contract and a retailer and a supplier carefully discuss all aspects of the purchase. A regular order or reorder often involves a uniform contract, since terms are standard or have already been set and the order is handled routinely.

Concluding Purchases

 The retailer takes title immediately on purchase
 The retailer assumes ownership after titles are loaded onto the mode of transportation  The retailer takes title when a shipment is received  The retailer does not take title until the end of a billing cycle, when the supplier is paid

 The retailer accepts merchandise on consignment and does not own the items. The supplier is paid after merchandise is sold

Receiving and Stocking Merchandise
 The retailer is now ready to receive and handle items. This involves: Receiving and Storing.

Checking and Paying Invoices
Figuring on-floor assortments Completing transactions Arranging delivery or pickup Processing returns and damaged goods Monitoring pilferage Controlling merchandise

Reordering Merchandise

 Four factors are critical in reordering merchandise: Order and Delivery Time Inventory Turnover Financial Outlays Inventory versus Ordering costs

Re-evaluating on a Regular Basis

 A merchandise plan should be re-evaluating regularly, The overall procedure, as well as the handling should be monitored.  Conclusion during this stage become part of the information gathering stage for future efforts.


 Is the total process of planning, interpreting, and coordinating the physical movement of merchandise from manufacturer (wholesaler) to retailer to customer in the most timely, effective, and cost-effective manner possible

Performance Goals

 Relate costs incurred to specific logistics activities  Place and receive orders as easily, accurately, and satisfactorily as possible  Minimize the time between ordering and receiving merchandise  Coordinate shipments from various suppliers  Have enough merchandise on hand to satisfy customer demand, without having so much inventory that heavy markdowns will be necessary

Performance Goals

 Place merchandise on the sales floor efficiently  Process customer orders efficiently and in a manner satisfactory to customers  Work collaboratively and communicate regularly with other supply chain members  Handle returns effectively and minimize damaged products  Monitor logistics’ performance  Have backup plans in case of breakdowns in the system

Supply Chain Management

 The supply chain is the logistics aspect of a value delivery chain
 Parties involved
 Manufacturers  Wholesalers  Third-party specialists  Retailer

Order Processing and Fulfillment

 Quick Response Inventory Planning (QR)  Floor-ready merchandise  Efficient Consumer Response (ECR)

Transportation and Warehousing
 How often will merchandise be shipped to the retailer?  How will small order quantities be handled?  What shipper will be used?  What transportation form will be used? Are multiple forms required?  What are the special considerations for perishables and expensive merchandise?  How often will special shipping arrangements be necessary?  How are shipping terms negotiated with suppliers?  What delivery options will be available for the retailer’s customers?

Problems Balancing Inventory Levels

 The retailer wants to be appealing and never lose a sale by being out of stock; it does not want to be “stuck” with excess merchandise
 What fad merchandise and how much should be carried?  Customer demand is never completely predictable

 Shelf space allocation should be linked to current revenues

Reverse Logistics
 All merchandise flows from the retailer back through the supply channel  Reverse Logistics Decisions  Under what conditions are customer returns accepted by the retailer and by the manufacturer?  What is the customer refund policy? Is there a fee for returning an opened package?  What party is responsible for shipping a returned product to the manufacturer?  What customer documentation is needed to prove the date of purchase and the price paid?  How are customer repairs handled?  To what extent are employees empowered to process customer returns?

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